Your guide to all things financial as coronavirus continues to affect economy
Assistance to our economy has been flowing thick and fast in the past week. These are the latest initiatives from the government and banking sector. These are very detailed as we really wanted you to have as much information as possible during this complex period.
The federal government and the Australian Banking Association (ABA) have announced stimulus measures to help people impacted by the coronavirus outbreak. They are pretty generous – but necessary.
We have summarised all of the measures below, especially as to how they can be helpful to the breeding and racing industries.
- Bank concessions
The banks have been given extra support by the government and the Reserve Bank of Australia (RBA) to work with and provide extra help to business owners at this time.
I would encourage businesses to contact their bank to ask how they can support you at this time.
The type of assistance that will be offered by banks will depend on individual circumstances, but can include:
- A deferral of scheduled loan repayments (principal and interest)
- Waiving fees and charges
- Interest-free periods or no interest rate increases
- Debt consolidation to help make repayments more manageable
Six month deferral on total business loan repayments
The ABA announced on Friday it has put in measures that will support banks in providing business customers with the ability to delay all business loan repayments (principal and interest) for a period of six months.
This provision is available as of last Monday, March 23.
If businesses would like to receive this benefit, they should contact their bank and apply for this relief.
Six month deferral on total home loan repayments – property owners note
Many of you have borrowed to acquire breeding, agistment and stud farms and there is relief in relation to your loan repayments.
The big four banks announced that in addition to the business loan deferrals, they would allow businesses with home loans to also defer the repayments (principal and interest) of their home loans for a period of six months.
If businesses would like to receive this benefit, they should contact their bank.
Update for other mortgage holders
For those without a business who have mortgage repayments, from announcements made yesterday, three of the big four banks are offering relief/moratoriums on repayments. That means they may be able to support you by putting your home loan repayments on hold for six months, with interest capitalised.
Interest rate reduction
The Reserve Bank lowered their interest rates from 0.5 per cent to 0.25 per cent last Thursday.
We encourage you to make sure your bank has passed this rate reduction on to you.
- FEDERAL GOVERNMENT SUPPORT PACKAGE NO 2
- Income support for racing and breeding businesses
PAYGW refunds to 100 per cent – increased from 50 per cent
These concessions apply to all racing and breeding businesses as their turnovers will generally be under $50 million; for example, breeders, stud farms, agistment and/or training operations.
Small and medium sized business entities and not-for-profits (NFPs) with aggregated annual turnover under $50 million and that employ workers will now be eligible for refunds of up to 100 per cent of PAYGW paid (up from the 50 per cent only announced recently).
Eligibility will generally be based on prior year turnover being under $50 million.
These initiatives are:
- The payment will be delivered by the ATO as an automatic credit in the activity statement system from April 28 upon employers lodging eligible upcoming activity statements.
- Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000 (originally $25,000).
- Eligible employers that pay salary and wages will receive a minimum payment of $10,000 (was $2,000), even if they are not required to withhold tax.
- The payments will only be available to active eligible employers established prior to March 12.
- An additional payment is also being introduced in the July – October 2020 period – with a maximum of $100,000 of total PAYGW relief available
The zone for PAYGW relief is now extending into the 2021 tax year, i.e. the September, 2020 quarter.
Eligible entities will receive an additional payment equal to all of the employers PAYGW payments they paid up to June, 2020.
This means that over the whole period of PAYGW relief (January 1, 2020 to September 30, 2020) eligible entities will receive at least $20,000 (those that don’t pay PAYGW tax) and up to a maximum total of $100,000 (those that do employ and pay PAYGW tax) under both payments.
To qualify for the additional payment, the entity must continue to be active as an employer after June 30, 2020.
This is how the additional payment works:
For monthly activity statement lodgers, the additional payments will be delivered as an automatic credit in the activity statement system. Each additional payment will be equal to a quarter of their total initial boosting cash flow (i.e. the total PAYGW credit paid to June, 2020) for employers in their June, 2020, July, 2020, August, 2020 and September, 2020 activity statements (up to a maximum total of $50,000).
If the PAYGW tax credit received in the March, 2020 BAS was $45,024, and then in the April BAS the credit received was $4,976 – up to the maximum of $50,000, for the next four monthly BAS’s, the following PAYGW credits would be received: June 2020 ($12,500), July 2020 ($12,500), August 2020 ($12,500) and September 2020 ($12,500) with a total additional payment being made of $50,000.
For quarterly activity statement lodgers, the additional payments will also be delivered as an automatic credit in the activity statement system. Each additional payment will be equal to half of their total initial boosting cash flow (i.e. the total PAYGW credit paid to June, 2020) for employers following the lodgement of their June, 2020 and September, 2020 activity statements (up to a total of $50,000).
The cash flow boost provides a tax-free payment to employers and is automatically calculated by the Australian Taxation Office (ATO). There are no new forms required.
- Cash-flow relief for financially distressed businesses
Tax payments and tax compliance – assistance
The government is offering administrative relief for certain tax obligations, including deferring tax payments for up to four months. This is similar to the relief provided following the bushfires for taxpayers affected by the coronavirus, on a case-by-case basis.
Creditors and directors
If you are owed money or facing pressing debts to repay yourself, this change is quite significant.
The government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive (i.e. from $2,000 to $20,000). The package also includes temporary relief for directors from any personal liability for trading while insolvent, and providing temporary flexibility in the Corporations Act 2001 to provide temporary and targeted relief from provisions of the act to deal with unforeseen events that arise as a result of the coronavirus health crisis.
Coronavirus SME guarantee scheme – new business loans
Obviously there are many yearling vendors who could wait a while for yearling sale proceeds or trainers needing cash-flow to get through a period where clients face sudden cash-flow difficulties. For those in this type of category, there is help at hand with acquiring unsecured loans for cash-flow purposes.
Under a scheme titled “The Coronavirus SME (Small and Medium sized businesses) Guarantee Scheme” the government will provide a guarantee of 50 per cent to SME lenders for new unsecured loans to be used for working capital.
This will enhance these lenders’ willingness and ability to provide credit, which will result in SMEs being able to access additional funding to help support businesses through the upcoming months.
SMEs with a turnover of up to $50 million will be eligible to receive these loans.
The government will provide eligible lenders with a guarantee for loans with the following terms:
- Maximum total size of loans of $250,000 per borrower.
- The loans will be up to three years, with an initial six-month repayment holiday.
- The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.
Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions.
As part of the loan products available, the government will encourage lenders to provide facilities to SMEs that only have to be drawn if needed by the SME.
This will mean that the SME will only incur interest on the amount they draw down. If they do not draw down any funds from the facility, no interest will be charged, but they will retain the flexibility to draw down in the future should they need.
The scheme will commence by early April, 2020 and be available for new loans made by participating lenders until September 30, 2020.
Quick and efficient access to credit for small businesses
Similar to the unsecured loans concession outlined above, the government is trying to make it easier for cash-strapped businesses to acquire assistance via less lender obligations lenders will need to meet in the coming six months.
The government is providing an exemption from responsible lending obligations for lenders providing credit to existing small business customers.
This exemption is for six months, and applies to any credit for business purposes, including new credit, credit limit increases and credit variations and restructures.
Responsible lending obligations do not currently apply to lending which is predominantly for a business purpose, but it can take time and effort for lenders to be satisfied that the money borrowed meets this test. By providing a temporary exemption from responsible lending obligations, this reform will help small businesses get access to credit quickly and efficiently.
- Income support for individuals
Jockeys, strappers and farm hands, as well as administration, racing club and veterinary employees – these are amongst the category of industry workers who could lose their livelihoods in the coming months.
Over the next six months, the government is temporarily expanding eligibility to income support payments.
A new, time-limited coronavirus supplement will also be paid at a rate of $550 per fortnight. This will be paid to both existing and new recipients of the JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit recipients.
Jobseeker Payment and Youth Allowance Jobseeker criteria will provide payment access for permanent employees who are stood down or lose their employment; sole traders; the self-employed; casual workers; and contract workers who meet the income tests as a result of the economic downturn due to the coronavirus. This could also include a person required to care for someone who is affected by the coronavirus.
Asset testing for the JobSeeker Payment, Youth Allowance Jobseeker and Parenting Payment will be waived for the period the coronavirus supplement is being provided. Income testing will still apply to the person’s other payments, as per the current arrangements.
- Temporary early release of superannuation
The government is allowing individuals affected by the coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21.
These super payments are tax-free and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
To apply for this early release of super, you must satisfy any one or more of the following requirements:
- you are unemployed; or
- you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
- on or after 1 January 2020: you were made redundant; or
- your working hours were reduced by 20 per cent or more; or
- if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.
If you are eligible for this new grounds for the early release of super, you can apply directly to the ATO through the mygov website: www.my.gov.au. You will need to certify that you meet the above eligibility criteria.
To ensure you receive your payment as soon as possible, you should contact your fund to check that they have your correct details, including your current bank account details and proof of identity documents.
- Temporarily reducing superannuation minimum drawdown rates – for accounts in pension phase
The government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for the 2019-20 and 2020-21 income years.
The government is also reducing both the upper and lower social security deeming rates by a further 0.25 percentage points in addition to the 0.5 percentage point reduction to both rates announced on March 12.
This measure will benefit retirees holding these products by reducing the need to sell investment assets to fund minimum drawdown requirements.